Tuesday, November 20, 2012

Trump Tower Developer Suing Investors

Developers of Toronto’s Trump International Hotel & Tower have launched lawsuits against seven investors in an effort to force them to close on deals for condo-hotel suites some claim haven’t turned out to be the Hollywood gold buyers were expecting.

Trump's companies have filed bankruptcy 4 times. What were these people thinking?

Dozens of purchasers of suites in the 65-storey luxury hotel are now trying to get deposits back and renege on final payments averaging over $500,000.

At the same time a London Ontario doctor is suing Talon 750k for misrepresentation from the deposits on the suites he bought in 2009

Most were caught up in the get-rich-quick mentality of Toronto’s booming condo market and intended to flip the units or use them to generate retirement income.

Talon has been facing an escalating buyer revolt since last February as the glitzy Trump Hotel set to open and buyers found out that maintenance fees, property taxes and other incidentals on the project’s 276 hotel-condo units had skyrocketed from Talon’s earlier projections.

It's like they've never invested in real estate before.

Emergency doctor Ganesh Ram alleges in his lawsuit that his costs jumped 40 per cent, with property taxes alone (the hotel-condos are considered commercial rather than residential units) now at $30,000 a year. While revenues from the hotel were meant to more than offset those kind of costs, buyers say they’ve been told hotel occupancy is running anywhere from 10 to 50 per cent and room rates are averaging about $300 per night instead of the $600 and up Talon had originally touted.

Can anyone point to an investor hotel where the numbers did work out? They certainly haven't worked up in Whistler.

Toronto lawyer Javad Heydary has been advising eight Korean purchasers and has been contacted by representatives of more than 40 other buyers seeking to rescind offers. He’s had a team of eight lawyers examining the deals.

What Heydary found came as a shock, especially to some buyers who readily admit they were so blinded by the flash and cash of Donald Trump that they didn’t do proper due diligence: Buyers weren’t purchasing so much a condo as a share in a high-end hotel that, so far at least, is losing money.

Some buyers are sophisticated investors. But many others are hard-working immigrants who just want their life savings back — 20 per cent deposits now sitting in trust and due to be released to Talon on closing.